News - March 16, 2023
The European Commission’s proposal for the Net Zero Industry Act has today been revealed. Whilst it’s the first part of a long process to thrash out a final legal text, it is encouraging to see a host of different measures introduced that will help establish an environment conducive to pulling climate tech innovations to market.
What this document also signals is the manner in which climate has become a much more serious and tangible domain for political and economic action. This Act is a response to the Inflation Reduction Act in the United States, which was in and of itself a response to Europe choosing that the ecological transition would serve as the basis for their future economic growth.
And Europe has a fair bit of catching up to do. A recent report highlighting innovation in critical technologies saw China leading in 37 of 44 categories, the US leads in the others and is usually in second place for all the others.
There’s lots to unpack in the document, and certain elements that need to be further built out, such as ensuring administrative and permitting procedures stop being a hindrance to rapid scaling of renewable energy projects. This needs to be recognized as an area of intense competition, and we need innovation here as much as in cleantech solutions.
Other interesting areas within the text include EU domestic production targets for cleantech. This aligns with a more protectionist approach that we are seeing from major economies with regard to developing their own home-grown industries and is perhaps the strongest indicator of the importance of climate tech to future economies. As the Act itself outlines, “the global market for key mass-manufactured net-zero technologies is set to triple by 2030 with an annual worth of around EUR 600 billion”
This can send strong signals to the market, but needs to be supported by other measures that can spur uptake of these technologies. Three interesting ones included in this document are;
Regulatory Sandboxes also allow for innovations to be tested in “real-world” conditions before being rolled out to larger populations.
Net Zero industry valleys: Geographic locations where it will be easier to set up factories and where permitting will be accelerated. The administrative regulations are frequently seen as an impediment to rapid uptake of climate tech.
Net Zero Industry Academies: Basically, we need more people with more of the skills required to do the hard work of “developing, producing, installing, commissioning, operating, maintaining and recycling clean technology products and components” as the text puts it. Whilst this measure is by no means limited to public purchasing, it’s critical for the aforementioned point on public procurement as we are often told that one of the challenges is simply having individual who are able to assess whether a technology meets their environmental objectives. So, its inclusion in the text is fundamental.
A final element that unfortunately is not the most exciting topic but can have huge ramifications is implementing “green public procurement” rules. Every year in Europe, a quarter of a million public authorities spend around 14% of GDP - around €2 trillion - purchasing services, works and supplies. If you can harness this funding to ensure that climate and environmental concerns are integrated, you can create enormous momentum.
It’s clear that these measures need to be implemented in a coordinated fashion as each element reinforces the potential benefit of the other. Europe has been working down this path for the last several years. Perhaps one of the best signals as to whether it is working is if other global powers start implementing their own forward thinking legislation. Perhaps that’s the biggest compliment that can be paid. We will be watching this space closely as the negotiations move forward, and we ourselves will be contributing as part of our continued focus on the legislation required to make real the ecological transition.